A card-not-present transaction refers to transactions conducted in which neither the payment card nor the customer are present at the point-of-sale. Examples, of card-not-present transactions include, but are not limited to, mail order transactions, telephone transactions, facsimile (fax) transactions, or Internet/e-commerce transactions. In all of the examples neither the customer nor the payment card are in the same physical location as the merchant.
In traditional card-not-present transactions the merchant is not guaranteed payment by the financial institution if the transaction is conducted fraudulently. A fraudulent transaction may be one in which the user of the payment card in the card-not-present-transaction is not the owner or rightful possessor of the payment card. For example, the user has stolen the card from the actual authorized card owner or otherwise wrongfully comes into possession of the payment card and proceeds to conduct card-not-present transactions using the card. This type of transaction is more prone to be fraudulent because, unlike face-to-face card-present transactions, the wrongful possessor of the payment card does not have to verify that they are the named individual on the payment card. Typically, in card-not-present transactions, the merchant is either unable to verify the identity of the payment card user or unwilling to implement the necessary procedures to verify the identity of the payment card user.
Therefore, a need exists to develop systems, methods, apparatus, computer programs and the like that provide for the merchant to be guaranteed payment by the card-issuing entity for card-not-present transactions. Such a desired system would eliminate the risk that merchants incur when they conduct card-not-present transactions and are unable to verify that the customer is within right to use the payment card.